The invention discloses a unified power flow controller-based fault processing method. The unified power flow controller-based fault processing method is characterized in that by comprising the following steps: after a line is broken down, bypassing a unified power flow controller, and judging the fault condition and a fault position by voltage and current abnormality and a line switch position signal; and when the fault position is located on an AC line side, automatically restarting the unified power flow controller after judging that the line fault disappears. The unified power flow controller-based fault processing method can protect the safety of main equipment and a power system of the unified power flow controller, and relatively well develops the advantage of the unified power flow controller for optimizing the system power flow; and the method is simple and reliable, can be matched with an existing line protection action, and achieves the effects of quickly and rapidly isolating the main equipment of the unified power flow controller for fault protection and improving the operating reliability of a unified power flow controller system. The invention further provides a unified power flow controller-based fault processing system.